Question

Robin Gavaskar, who recently founded a company that produces baseball bats and balls, wants to determine her company's policy for revenue recognition. According to the revenue recognition principle, the most appropriate time to recognize revenue would be when

Answer 1

According to the revenue recognition principle, revenue should be recognized when the company has completed its performance obligations. This is essential for accurate financial reporting.

Step-by-step explanation:

The most appropriate time to recognize revenue, according to the revenue recognition principle, is when the company has completed its performance obligations and the revenue can be reliably measured. This principle is outlined in the Generally Accepted Accounting Principles (GAAP) and is important for accurately reporting a company's financial performance.

For example, in Robin Gavaskar's baseball bat and ball company, revenue should be recognized when the products are delivered to the customers and they have paid for them, or when the company has performed all other necessary obligations related to the sale and there is an assurance of collectability.

It is important for companies to adhere to the revenue recognition principle to ensure accurate financial reporting and transparency for shareholders, investors, and other stakeholders.